by James Petras
The ongoing collapse of the stock market and the loss of hundreds of
billions of dollars managed by Wall Street investment banks illustrate the
pitfalls and danger of free market capitalism facing the entire working
population of the United States.
The near bankruptcy of Social Security
The attempt by the White House and leading Republican and Democrat
congresspersons as recently as 3 years ago to 'privatize' Social
Security essentially turning over the management and investment of
trillions of dollars in Social Security funds to Wall Street with
the argument that private investors would earn more, would have led
to the bankruptcy of the entire Social Security fund.
Privatization would have allowed the major private investment banks
to speculate and leverage even riskier financial instruments with
the disastrous results we are witnessing today. While private
pension funds go belly up Social Security continues. It is the
private pensions, which have gone bankrupt not the publicly
managed Social Security fund, contrary to the experts and critics of
Social Security. Clearly the current private debacle argues for
public control and management of pension programs.
All the major private pension funds for
public and private employees, including TIAA CREF, CALPERS and labor
union pensions have lost anywhere between 23% to 30% since January
and show negative growth over the past 5 years. Clearly linking
pension funds to the stock market has severely reduced the living
standards of retirees, forcing many to remain in the labor force
into their seventies and beyond or to sink into poverty. Pensions
linked to publicly funded productive activity would avoid the losses
and risks embedded in investing in the stock market.
The bipartisan strategic decisions to
convert the US into a 'service' economy as opposed to an advanced
and diversified manufacturing economy is the root cause of the
collapse of the US financial system and the emerging long-term
recession. From the 1960s onward, the political elite adopted
policies that promoted finance, real estate and insurance, the
so-called FIRE sectors which raised rents, redirected subsidies,
provided tax concessions and subsidies, and destroyed and displaced
industry. The re-conversion of the FIRE economy back to a balanced
manufacturing economy and welfare state, essential for reversing the
collapse of the US economy, will require a major political upheaval.
The massive flight of capital from
productive sectors to FIRE was accompanied by the huge surge of
capital overseas, making the domestic economy over dependent on
'services', particularly volatile and risky 'financial services' and
highly indebted consumers. The conversion of the US from a
diversified economy to a 'FIRE' monoculture increased the
probability of a general collapse if and when the financial/real
estate market went under. Recovery and sustained growth can only
occur with the return of a diversified economy, the retention of
capital from overseas flight and large-scale, long-term public
investment and incentives for the productive and social service
The pursuit of military-driven empire
building at the expense of joint ventures and reciprocal trade
agreements with countries with expanding markets, strategic energy
sources and large populations and markets, created enormous budget
and trade deficits and alienated potential sources of markets and
strategic commodities. Trillion dollar military expenditures in
pursuit of prolonged, costly colonial wars (without end), diverted
funds from the application of technological advances and high-end
manufacturing, which would have lowered costs and increased market
competition. Equally important, by shifting from market-driven
domestic expansion to overseas military-driven conquest, the entire
axis of economic power shifted from industrial to financial capital.
Finance capital essential to funding government budget deficits
incurred through military expenditures, grew in influence Wall
Street replaced the steel-belt as the axes of power in Washington.
The ascendancy of militarism and
financial capital facilitated the increase of influence of a
virulent power configuration promoting the regional hegemonic
interests of a colonial-militarist state specifically, a previously
marginal political lobby the pro-Israel-Zionist power
configuration (ZPC). The military-driven empire builders saw in the
ZPC a strategic ally in pursuit of their global conquests; the ZPC
saw an open door to high office and multiple opportunities to
promote Israel's expansionist agenda through their influence in
Congressional Committees, electoral campaigns and direct White House
The ZPC surge to the top echelon of power was
aided and abetted by the increase of financial support they received by
members in strategic positions in the most lucrative financial institutions.
The ZPC was an economic beneficiary of the
speculative bubble: it was the massive infusion of financial contributions
that allowed the ZPC to vastly expand the number of full-time functionaries,
influence peddlers and electoral contributors that magnified their power
especially in promoting US Middle East wars, lopsided free trade agreements
(in favor of Israel) and unquestioned backing of Israeli aggression against
Lebanon, Syria and Palestine.
Economic recovery is contingent on ending budget
busting military imperialism. That will not happen unless there is a
wholesale replacement of the political elite nurtured on the metaphysics of
military-based global power.
No economic recovery is possible now or in the foreseeable future as long as
the US Congress and executives provide trillion dollar bailouts to Wall
Street's insolvent speculators, bankroll 700 billion dollar budgets of ever
expanding war spending and while Zionist power brokers dictate US Mideast
The lessons of the past tell us a great deal about what paths we should and
Social Security still exists precisely because the US public rebelled and
defeated its proposed handover to Wall Street and it remained a publicly run
program. The financial system collapsed because the US economy 'specialized'
in a single crop finance at the expanse of a diversified productive
economy. The political system is totally discredited because it is run by a
failed political elite which blatantly represents and acts on behalf of a
few thousand financial oligarchs; a couple hundred militarist oligarchs and
a few dozen zealous Zionist organizations.
The 'power elite' is only as powerful as it is able to manipulate,
intimidate and beguile three hundred million plus US citizens into thinking
that they are indispensable to their lives.
The overwhelming popular rejection of the
privatization of social security and the Wall Street bailout suggests that
the ruling oligarchy is not invincible.